Monthly Archives: May 2008

I noticed an interesting graphic in a virtualization article entitled The Virtualization Opportunity which purports to show likely desktop virtualization winners and losers. I largely agree with what it is suggesting. Here’s my cut on some of the companies it mentions:

• VMware: VMware is clearly in the catbird seat. It was already doing well with server virtualization, when suddenly it has desktop virtualization thrust upon it. Not just free bread, but jam too! The worst outcome for VMware in desktop virtualization is that it will finds the market very competitive.
• Citrix: Citrix’s problem is that it currently owns the vast majority of the market for PCs that run session based computing which is estimated to be about 15 million seats. Citrix thus has an entrenched position to defend. That explains why it has been in acquisition mode (with Ardence, Xen, etc.) The traditional Citrix desktop solution is less exensive than a virtualized desktop, but nevertheless it’s likely that the virtual desktop will supersede that solution over time. Citrix needs to execute well to compete strongly with VMware. If it doesn’t it will be a loser.
• IBM: IBM is very likely to be a winner, because it sold off its PC and thin client business before desktop virtualization was a twinkle in anyone’s eye. So it is unlikely to lose desktop revenue, but it can gain it by selling virtualization blades. It can also sell associated management software. It is likely that IBM will also establish a new hosting business for virtual desktops.
• Hewlett-Packard: HP is in the uncomfortable situation where it has almost as much to lose as it has to win. As more and more desktop units move into the data center, it loses PC sales but it can replace these with blade sales and sales of broker software (as it clearly intends to do). To its credit, it has done well in partnering with Citrix and VMware – it has the lion’s share of the server-side business already, but this means that growing its share may be difficult. It will probably also be an important partner for Microsoft as it tries to establish a market for Hyper-V, but that merely means VMware revenue going to Mircosoft. HP is unlikely to lose customers to any other hardware vendor, but in its own customer base it’s pretty much a zero sum game. HP’s goal in the market must be to take market share from Dell, which it could do as it has a much broader set of offerings for desktop virtualization. Nevertheless it has to execute well. Like IBM, HP also has the opportunity to establish a new hosting business for virtual desktops.
• Dell: Of the major hardware vendors Dell has the most to lose and, to be honest, it’s hard to see that it won’t lose business to both IBM and HP. Dell doesn’t have either a software business or a hosting business. Neither has it yet established a strong portfolio of offerings for desktop virtualization. It has an agreement for PC streaming with Citrix, but this is likely to be a limited market. Dell needs to rectify this as soon as possible.
• Sun Microsystems: Sun has been in this game for longer than most other vendors and has everything to gain and very little to lose in desktop virtualization. Although it has an installed Sun Ray desktop base, it’s pretty much all new revenue for Sun.
• Microsoft: At first glance, Microsoft is in a similar situation to HP in that it looks very much like it’s a zero-sum game. Desktop virtualization helps considerably in Vista adoption because it can cut the hardware costs, but it doesn’t present a new revenue stream. Microsoft is taking some of the air out of the desktop virtualization market by offering Hyper-V at no cost. It may dent VMware’s desktop virtualization revenue streams, but it’s not going to generate revenue. If Microsoft is going to generate new revenue, it has to make a play in the virtualization management area, where VMware dominates. That’s why Microsoft acquired Kidaro SoftGrid AssetMetrix and Calista. It means to play strongly in this market. Unfortunately, Microsoft is vulnerable to losing revenue in the longer if the regular PC refresh rate diminishes – and that it is very likely to happen as the desktop virtualizes. The nightmare scenario for Microsoft would be that Linux with Wine became viable as a virtual desktop. If this happens then Microsoft has everything to lose. I don’t see this as likely though.
• Other PC Vendors: We can lump Lenovo, Acer, Sony and many other PC manufacturers together here. They all stand to lose and its hard to see how they can win out in any way. The only exception is Apple. Its proprietary technology and lack of business market share are in its favor.
• Intel and AMD: You can consider both of these vendors together in terms of the challenge it creates. They are both likely to lose out because desktop virtualization untimately leads to less cpus being sold, especially now that cpus are multicore.

An important aspect to this market is that the consumer PC is starting to diverge from the corporate PC. This is highly disruptive and could lead to a general restructuring of the whole computer industry.

This is a posting in the Virtualization Focus Series. Click here to see an index of such postings.